Feeling Keynes? Why crisis economics needs to look beyond the 40s

April 14, 2020  |  By Luca Tiratelli, Policy Researcher, NLGN

After years of enforced slumber, the state is starting to stir. The signs of this were there even before the pandemic hit in full, with Rishi Sunak’s March budget promising massive increases in areas like infrastructure spending. The COVID-19 crisis has since supercharged this, with huge, multi-billion-pound initiatives being announced on a what feels like a daily basis. Big government is eyeing a comeback. Keynesianism – big government spending funded by borrowing – is back on the agenda.

For those of us who have spent the last decade opposing austerity, and the senseless hacking away of public services, any move in this direction feels like an extraordinary victory. Run of the mill, technocratic Keynesianism – or simply upping spend on public services rather than decreasing it – has come to feel like an almost utopian ideal, a panacea for all societal ills. As we marvel at our NHS workers rising to the challenge of the pandemic, we look back at the achievements of the brief post-war Keynesian consensus, and the startling legacy of the Attlee government, with slack-jawed admiration.

We should, of course, be hugely grateful of the achievements of Keynesians and social democrats-past. However, the important thing for people with any kind of progressive politics today is that we learn from its failures as well as its successes, and that our ambitions are not limited by what was considered politically possible in the late 1940s.

I’ve recently been reading Lynsey Hanley’s “Estates: An Intimate History”, which provides a detailed account of social housing in Britain over the last 100 years. The radicalism of post-war building programmes, and the scale of what was achieved (300,000 houses a year!) shines through the pages. And yet at the same time, the problems that came with this approach are also glaring. People being moved to areas they had no connection to, often with next to no say in the process, created all manner of social, political and health problems. The post-war house building boom tended to work on the basis of assumptions of what was good for people, rather than their expressed needs – a dynamic that has been anything but unique to housing.

What does this mean for the 2020s? Primarily, it means that if the state is to rediscover its capacity to intervene in society, then we must demand that it now does so in a more democratic way. The state needs to expand – but every time it grows, this needs to be mirrored by an increase in our democratic control over it and its activities.

Any revived Keynesian project needs to be focussed on working with communities, not simply on their behalf. It needs to be focussed on people’s actual wants and needs, it needs to listen to them, and the public services that it creates are things that communities need to feel that they have ownership over. In practice, this will mean going way beyond simple consultation exercise – we need to be calling for deliberative processes, and things like participatory budgeting and community commissioning.

For the last decade, our communities have been buffeted by successive forces over which they have no control – the meltdown of financial capital, the indiscriminate cutting of public services, a global pandemic. A new era of state expansion, if that is what’s to come, needs to be a source of liberation, rather than further control. It needs to be something that empowers people, not that works around them. It needs to unlock the potential of our communities, rather than to act presumptively in their interests.

Essentially, we need John Maynard Keynes’s macroeconomic ideas to meet Nobel prize-winner Elinor Ostrom’s passion for community power. This might be the basis of an economic formula fit for the 21st century.